Russel 3000 Index Mean Reversion, Free QuantConnect Strategy!

Hey there r/Trading!

We are lucky to have been given this free strategy from the guys at QuantConnect, with plenty of insight into how it works:

​

Ready to ride the rebound? Check out this free QuantConnect strategy for targeting mean reverting stocks in the Russel 3000.

The strategy analyzes the Russel 3000 index daily to identify stocks deviating from the market trend, aiming to capitalize on potential rebounds. It selects the largest 500 constituents from the index and executes trades gauging the relative movement of individual securities compared to the index.

First, we scale the stock and index prices so their movement can be compared. We use the price 5 days earlier as the benchmark to calculate the percentage change since then.

We picked arbitrary boundaries for defining divergence, but moves of less than 3% were ignored, along with ignoring moves of more than 20%. We assumed large moves probably have a fundamental reason and won't be reverting to the mean. When the stock diverges downward more than one standard deviation, we place a bet, assuming it’ll revert to the index.

https://preview.redd.it/9zv9jbvjolkc1.png?width=624&format=png&auto=webp&s=bed714749f391db3561bcfcc599d711dff5963db

The strategy uses built-in indicators for standard deviation (to capture typical fluctuation or volatility) and exponential moving average (for a smoother, lagging trend line), along with built-in portfolio construction and execution models to size the bets and send market orders to open long positions accordingly.

You can deploy this strategy code live to your brokerage on QuantConnect in minutes.

​

Jared

QuantConnect